Government to finalize specific bankruptcy settlement for MSMEs under IBC

Under section 240A of the Insolvency and Bankruptcy Code (IBC), 2016, the Ministry of Corporate Affairs (MCA) is finalizing a specific insolvency resolution. "The Ministry of Corporate Affairs is finalizing a particular bankruptcy settlement under section 240A of the Code to offer compensation to MSMEs and the same will be informed in the coming days," said a release issued by the Ministry.

The report posted after Finance Minister Nirmala Sitharaman examined Atmanirbhar Abhiyaan's development to date, also claimed that the default threshold under IBC Section 4 has been increased to Rs 1 crore from Rs 1 lakh."In enforcing the powers granted under section 4 of the IBC, 2016 (31 of 2016), the central government hereby defined Rs 1 crore as the minimum sum of default for the purposes of the stated provision through a notification issued on 24 June 2020".

In addition to the announcement by Sitharaman declaring financial assistance during the coronavirus epidemic, on 5 June 2020, the IBC (Amendment) Ordinance 2020 authorized for the introduction of Section 10A into the Code to partially delay the commencement of the Corporate Insolvency Resolution Process (CIRP) pursuant to Section 7, 9 and 10 of the Code for a period of six months or more.

In addition, after authorisation, the Rs 30,000 crore Special Liquidity Scheme for Non-Bank Financial Companies (NBFCs), Housing Finance Companies (HFCs) and Microfinance Institutions (MFIs) has been introduced.

"RBI has released a notification on the Scheme to NBFCs and HFCs on 1 July 2020. SBICAP garnered 24 applications for Rs. 9,875 crore of funding as of 7 July 2020 that are being assessed. The first application was accepted in this context and the subsequent applications are being processed," it added.